LegalandPublicPolicyConsiderationsoftheEUReferendum

Brexit Insight From the EU-27: Czech Republic

The Czech government adopted the Act No. 74/2019 Coll., which aims to soften the possible negative consequences of a “no-deal” Brexit. The act is intended to be a temporary measure, and all the instruments within it will last only until the long-term measures are adopted.

The act is to be effective from the day the Treaty on the Functioning of the European Union and the Treaty on the European Union cease to be applicable to the UK and, simultaneously, if no agreement on the terms of the UK’s withdrawal from the EU (i.e. the Withdrawal Agreement) is adopted. Nevertheless, the act sets the deadline to 31 December 2020 at the latest. During this period, British citizens will be guaranteed equal treatment in 18 selected areas as if they were still European Union citizens. The Czech government expects that there will be reciprocity from the British side.

The areas dealt with by the act include regulation of obtaining Czech citizenship; marriage and registered partnership issues; access to the labour market and eligibility for unemployment benefits; income tax; recognition of professional qualifications; and provision of legal services by citizens of the UK and similar.

The Czech Republic’s government favours a Brexit on the basis of the Withdrawal Agreement and is against a “no-deal” Brexit. The Czech government is taking a cautious approach to Brexit: the majority of the government members did not want Britain to leave the EU. The Czech Prime Minister said he would very much like the British to change their minds, and is willing to support a Brexit postponement for up to one year. According to the Prime Minister, Britain would “…be given time to finally organise its inner affairs”. At the same time, the Prime Minister promised that the Czech Republic would not make life difficult.

On the other hand, even though the uncertainty regarding the issue of Brexit can have a negative impact on both the EU and the UK, a non-negligible part of the public in the Czech Republic, including some opposition politicians and economists, supports Britain’s decision to leave the EU and would even welcome a “no-deal” Brexit, as they argue that the UK is pushed too hard by the EU.

The Czech Republic is trying to prepare for all Brexit permutations. A “no-deal” would cause major issues, especially in the trade in goods or services. In the event of Brexit with the Withdrawal Agreement – which would likely keep the UK in the Customs Union – this would likely prevent problems with the import of goods and services. The Withdrawal Agreement is also supposed to continue to protect geographical designations, trademarks and other intellectual property rights. It would also allow for the free movement of judicial decisions and mutual participation in public procurement.

Although a Withdrawal Agreement is expected to be concluded in some form, some potential issues may remain. The agreement would probably give British companies only a limited access to the Czech financial market. From this point of view, setting up an establishment in the EU might be a solution for UK financial institutions.

It is also uncertain whether the mutual recognition of professional qualifications will remain effective once the transition period expires. For this reason, securing local qualifications as early as possible, especially for key employees, is important.

The UK will also exit the European Atomic Energy Community Euratom, which could have some impact on the energy sector. Reviewing and, if necessary, amending supply contracts will be critical. Czech economists are also warning against a possible rise in electricity prices due to expensive emission allowances, which will have a detrimental impact on the manufacturing sector in particular.

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